Home' MFAA Prosper : Mortgage and Finance Brief 19 Contents 14 Mortgage & Finance brief
After the Reserve
Bank's series of
interest rate cuts last
year, we've found
that brokers are expecting a prolonged low
rate environment. In a survey of our broker
network conducted in October 2012,
more than half the brokers sur veyed (51%)
expect that interest rates will be even lower
in October 2013, and a further 28% believe
rates will remain around the same level.
Brokers also indicated that the low-rate
environment was having an impact on the
types of loans that borrowers were opting
for, with more than half of the respondents
observing an increase in the take up of
fixed rate loans last year.
The fixed interest rate environment
is very competitive at the moment, and
Australians are seeking certainty with their
home loans. With fixed rate loans more
popular than ever, NAB Broker's rates are
the lowest they've been in years and are
among the most competitive in the market.
The big question, of course, is whether
reductions to the RBA's cash rate is
increasing demand for residential property.
According to our sur vey of brokers, the
cuts were most effective in Tasmania, the
Northern Territory and Western Australia,
reflecting the lower price points where
a small increase in loan affordability can
make a big difference to aspiring buyers.
Buyer confidence has experienced a boost thanks to rate cuts in 2012,
but what about the uptake of competitive fixed rate loans? Mortgage
& Finance Brief garners opinion from three market segments.
Head of Corporate
speculation of fewer
rate cuts to come,
and the latest CPI
data hinting at less interest rate activity,
it comes as no surprise that borrowers are
taking advantage of the good fixed rate
loan offers available.
Lenders have been heavily discounting
their fixed rates to attract new customers,
and it seems to be working. According to
Mortgage Choice data, demand for fixed
rate home loans reached a six-month high
in October at 22% of all newly approved
loans. This same trend was experienced
nationally, apart from South Australia
where preference fell marginally.
By fixing their interest rate, bor rowers
are locking in peace of mind over the next
few years, which is important given that
consumer confidence is down.
Recent housing outlook reports point
out that Australia is experiencing high
levels of housing affordability. The
proportion of household income being put
towards mortgage repayments is falling in
all capital cities.
In fact, apart from a period in 2009 when
the RBA cut interest rates in response to
the GFC, we are looking at the best levels
of affordability across most capital cities
since the beginning of last decade.
helped to boost
consumer sentiment in the second half of
2012. Mortgage holders are finding it easier
to meet repayments, and home buyers see it
as a good time to enter the market.
This is reflected in the Genworth
Homebuyer Confidence Index (HCI)
that measures the sentiment of Australian
mortgage, and would-be mortgage, holders.
The latest results shows confidence has
reached post-GFC highs with the index up
2.2% to 98.4% -- its highest level since 2007
and 8.0% above its low of 2008.
On a state-by-state basis, everywhere
except Tasmania saw increases in the
HCI, with Victoria seeing the largest,
up 7.7% from a low of 92.3% in March
2012, overtaking New South Wales and
Queensland. Western Australia had the
smallest increase but held on to its lead.
This has likely been driven by most
economic indicators improving between
March and September 2012, with the cash
rate, unemployment, oil prices and inflation
falling. This is the second consecutive
survey in which mortgage stress has fallen,
with 82% of respondents confident of
making repayments, its highest level since
the GFC, up 4% since March 2012.
Recent housing outlook
reports point out that
Australia is experiencing high
levels of housing affordability.
With fixed rate loans more
popular than ever, NAB
Broker's rates are the lowest
they've been in years.
Mortgage holders are finding
it easier to meet repayments,
and home buyers see it as a
good time to enter the market.
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